In this instalment of our series on Cloud Enterprise Resource Planning (ERP) systems, we’ll break down the key benefits of choosing a true cloud system over a hosted cloud system. Read on to find out why the true cloud ends up saving organisations money, increases data and system security, and helps organisations of all sizes scale.
First, let’s review some definitions. In a previous article, we discussed the different types of Cloud ERP.
Cloud ERP systems run on a vendor’s cloud platform instead of your organisation’s network, allowing you to access it over the internet. Any Cloud ERP hosts your data and the program on the internet, yet not all cloud solutions are the same. We view them in two categories:
True Cloud ERP
True cloud ERP systems create a core software and infrastructure that is then licensed to your organisation. The vendor manages both the hardware and the software of the program, which leads to multiple benefits (as we will see later in the article).
Hosted Cloud ERP
Hosted cloud ERP systems offer organisations the license to the software of their cloud program but requires the organisation to manage the hardware themselves.
One of the key indicators of whether software is true cloud or hosted cloud is the size of the ‘apps market’. True cloud software (such as NetSuite and Salesforce) are likely to have ‘app exchanges’. Hosted cloud offerings are likely to be significantly more limited with a ‘library’ of potential customisations of the core software.
Now that our definitions are out of the way, let’s discuss the benefits of the true Cloud ERP software.
8 Benefits of True Cloud ERP Software vs Hosted Cloud ERP Software
- Cost savings. True cloud ERP generally costs about 30% less than on-premises or hosted cloud ERP. Since the true cloud ERP vendor hosts and manages both the hardware and the software on its own servers, organisations avoid upfront infrastructure costs as well as additional costs for IT staff, maintenance, security and updates. The vendor provides ongoing IT support of both the hardware and the core software. In contrast, organisations with an on-premises or hosted cloud ERP system have to shoulder additional costs for maintenance, specialised in-house or on-call resources, upgrades and updates, as well as managing server costs as the organisation scales.
- Easy updates. Software requires regular updates to improve and operate well. With true cloud software, updates run easily through the core software so that each customer can expect the same update via the same process at the same time. Meanwhile, hosted cloud ERPs have to submit software updates for each customer’s server platform. This may even involve hiring contractors or partners to manage the process, which increases the chances for bugs, mistakes, and breaks in customisations. With true cloud ERP, updates can take as little as 30 minutes and usually occur during off hours to prevent business disruptions. In fact, true cloud software vendors typically strive for 99.999% availability—which translates into customers seeing less than eight minutes of unplanned downtime each year.
- Implementation speed. One of the biggest hurdles of any new ERP solution is the implementation time, which can directly affect organisational downtime and time to value. In one study looking at all types of ERPs, only about half of businesses said their implementations finished in the projected time. With true cloud ERPs, the core software and hardware already exist. That means organisations don’t need to budget IT staff and time to setting up the hardware or making changes. Meanwhile, hosted cloud ERPs require more IT intervention, which inevitably prolongs the implementation project.
- System security and compliance. Every organisation needs to prioritize the security of their software and systems, especially when it comes to financial data. Since the core software remains the same across true cloud ERPs, the ERP vendor can more easily monitor and protect the platform. Meanwhile, hosted cloud ERP vendors have to monitor the software they provide across each organisation’s customisations, which is notorious for creating security holes during updates.
- Accessibility. Since true cloud ERPs are hosted and managed on the internet, they are more accessible than systems limited to private servers. That means ERP users can access business information in real time, from anywhere and on any device, with very high levels of security and compliance. Employees across the organisation work with the same data, no matter the business unit or location, and can make decisions faster and more confidently.
- Scalability. Without the challenges of adding more servers for more users, locations or subsidiaries, true cloud-based ERP solutions make scaling organisations easier. As an organisation grows, the true cloud ERP grows. In contrast, hosted cloud software is aligned with the single customer, so scalability depends on how your IT department manages the hardware.
- Customisations and agility. True cloud ERPs can also be more easily customised to fit your needs—either from implementation or over time, as your organisation grows and evolves. While hosted cloud ERP software can be tailored to your needs, those customisations are tied to the current software and may be difficult to reimplement with future versions, particularly if integrations were developed in-house. In fact, this is one of the main reasons some businesses avoid upgrading their on-premises or hosted cloud ERP systems or pay significant ongoing maintenance costs for their hosted cloud system. Furthermore, true cloud ERP systems tend to integrate well with other cloud-based products, and new modules can be added to a true cloud ERP system without downtime or additional hardware. Since the core software is the same, other cloud-based software can build an integration knowing that it will work across all instances of the true cloud ERP.
- Data security, compliance and disaster recovery. Relying on an external vendor to safely house an organisation’s data is an understandable concern for many charities. However, true cloud-based ERP providers often offer better security and compliance than organisations could otherwise afford. Furthermore, an organisation can remain confident that its data is always backed up, and the vendor is armed with planned and practiced disaster recovery procedures. True cloud providers typically offer enterprise-grade security and end-to-end encryption of data between the vendor and the organisation, including disaster recovery. In contrast, hosted ERP platforms typically leave more of the security up to the organisation. That includes backing up all data in case of software failure. Ultimately, the hosted cloud ERP requires your organisation to be more proactive about security of your system and data than the true cloud provider.
The true cloud ERP comes with many advantages, including better scalability, better security, and lower overall costs. For some stakeholders in larger organisations, however, this can be seen as threatening. By empowering finance teams, the need for a large IT team is reduced, with less time being spent on core IT and administration in managing processes and infrastructure.
As Oracle-NetSuite’s EMEA Social Impact specialist partner, Cloud Doing Good is always happy to talk through the benefits and challenges of any ERP solution with your team. Get to know us with this 2.5 minute video on who we are.